Hoy hablaríamos de «llevar trigo a Castilla».

As noted above, TILA applies certain substantive protections to all credit cards. Specifically, the provisions prohibiting unsolicited issuance of credit cards (section 132) and limiting liability of cardholders for unauthorized use (section 133) apply to small business credit cards. The Board notes that other consumer protection statutes and regulations address business credit card activity, such as the Equal Credit Opportunity Act, 15 U.S.C. 1691 et seq., and section 5 of the Federal Trade Commission Act, 15 U.S.C. 45(a)(1), which prohibits unfair and deceptive acts and practices.52

Although the Board does not have direct data regarding the adequacy of protections for small business cardholders against unfair and deceptive acts and practices, the volume and nature of credit card complaints raised by small businesses may provide some indication regarding potential areas of concern. The Board receives and responds to consumer inquiries and

51

Bank of America (2010), “Bank of America Commits to Clarity for Small Business Customers,” press release, April 1, http://newsroom.bankofamerica.com/index.php?s=43&item=8669.

52

See, for example, “In the Matter of Advanta Bank Corp., Draper, Utah,” FDIC-08-259b, FDIC-08-403k, June 30, 2009 (a cease and desist order prohibiting deceptive solicitations and rate increases on accounts in an unfair manner), available at Federal Deposit Insurance Corporation (2009), “FDIC Announces Settlement with Advanta Bank Corporation for Deceptive and Unfair Practices,” press release, July 1,

complaints on a broad range of banking topics, including questions regarding credit cards.53 In preparing this report, the Board reviewed complaint information maintained on the Board’s consumer complaint system, CAESAR. Specifically, the Board reviewed complaints about credit cards received from businesses and from individual consumers.54 From 2007 through 2009, 3,886 complaints concerning credit card activity were processed, of which 2 percent (69) were from businesses and 98 percent (3,817) were from consumers. These complaints are summarized in table 7. Complaint category Percent of personal card complaints Percent of business card complaints Account opening 11.9% 11.6% Account terms 23.5% 10.1% Application 7.8% 8.7% Billing 18.3% 21.7% Collection 10.9% 2.9% Disclosure 1.2% 1.5% Fees 5.7% 11.6%

Fraud, forgery, embezzlement,

or theft 5.9% 17.4%

Other 14.7% 14.5%

Total 100.0% 100.0%

Number of complaints 3817 69

Source: Complaint Analysis Evaluation System and Reports (CAESAR), Washington: Board of Governors of the Federal Reserve System.

Table 7. Summary of personal card user and business card user complaints during 2007–09, from CAESAR complaint data files

The relative scarcity of credit card complaints by small businesses may reflect a true lack of complaints on the part of small businesses. However, it is important to keep in mind that there are many more consumers and consumer credit card accounts from which consumer complaints may be generated, compared to small businesses and small business credit card accounts.

Nevertheless, one large issuer of consumer and small business credit cards reported that, on a per

account basis, they receive about 20 percent fewer small business credit card complaints

compared to consumer card complaints. This issuer also indicated that the top categories of complaints from small businesses are: (1) changes in terms; (2) collections; and (3) billing

53

In addition, the Board investigates complaints against state member banks and forwards complaints against other creditors and businesses to the appropriate enforcement agency.

54

Note that, when processing complaints, the Board generally does not distinguish between businesses based on size or number of employees.

Report to the Congress on the Use of Credit Cards by Small Businesses 49 disputes. The top categories of complaints from the card issuer’s consumers are: (1) collections; (2) fees; and (3) changes in terms.

Based on the Board’s review of complaints the Board has received, the nature of the complaints raised by businesses and individual consumers have some similarities, as well as some notable differences.55 Billing and account-opening problems were among the top three sources of complaints for both consumers and businesses. Billing problems (including, among other things, payment errors or delays, errors in finance charge calculations, and problems with billing error resolution) accounted for roughly one-fifth of the complaints from each group, and account-opening problems (including delays in application decisions, unsolicited cards, and concerns about preapproved solicitations) comprised about one-eighth of complaints from each group. However, complaints involving account terms or fraud, forgery, embezzlement, or theft show notable differences between consumer and business complaints. Nearly one-fourth of consumer complaints, but only about one-tenth of business complaints, involved account terms. Complaints about fraud, forgery, embezzlement, and theft were the second most-common category for businesses (comprising about one-sixth of complaints) but were relatively infrequent for consumers. Other notable differences include complaints about collections (including, among other things, debt collection tactics, judgments, liens and garnishments), which ranked higher among consumers than among businesses, and complaints about fees (primarily late fees and over-the-limit fees), which ranked higher among businesses than among consumers.

55

It is important to keep in mind that any statements made in this paragraph regarding complaints from businesses are based on an extremely small number of observations.

51

Conclusion and Recommendations

The Board has considered whether small business credit cards may benefit from being subject to disclosure and substantive requirements similar to those in TILA (as amended by the Credit CARD Act). The Board notes that the Congress has excluded business credit cards from coverage under TILA, with the exception of the 1974 amendments providing business cards with certain protections against unsolicited issuance and unauthorized or fraudulent use. If the

Congress were to consider establishing new disclosure requirements and substantive protections for small business credit cards, it should consider the similarities and differences between consumers and small businesses and the two different types of credit cards, as well as the differences between TILA’s disclosure requirements and its substantive protections.56